Bidding Strategies and Takeover Premiums: A Review

74 Pages Posted: 5 Aug 2008 Last revised: 5 May 2009

See all articles by B. Espen Eckbo

B. Espen Eckbo

Tuck School of Business at Dartmouth; European Corporate Governance Institute (ECGI)


I review recent empirical research documenting offer premiums and bidding strategies in corporate takeovers. The discussion ranges from optimal auction bidding to the choice of deal payment form and premium effects of poison pills. The evidence describes the takeover process at a detailed level, from initial premiums to bid jumps, entry of rival bidders, and toehold strategies. Cross-sectional tests illuminate whether bidders properly adjust for winner's curse, whether target stock price runups force offer price markups, and whether auctions of bankrupt firms result in reflect fire-sale discounts. The evidence is suggestive of rational strategic bidding behavior in specific contexts.

Keywords: Takeover, offer premium, bid strategy, bid jump, merger, tender offer, auction, negotiation, toehold, payment method, markup pricing

JEL Classification: G34

Suggested Citation

Eckbo, B. Espen, Bidding Strategies and Takeover Premiums: A Review. Journal of Corporate Finance, Vol. 15, pp. 149-178, 2009, Tuck School of Business Working Paper No. 2008-48, Available at SSRN:

B. Espen Eckbo (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States
603-646-3953 (Phone)
603-646-3805 (Fax)


European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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